Break Even Point For The US Domestic Auto Industry

In April 2009 Ford declared that it would not need government aid and claimed that it had a plan to break even in two years. Ford has been ahead of its main rival General Motors in scaling down its business by selling Aston Martin, Land Rover and Jaguar over the past two years. GM, meanwhile, went through a massive reorganization after filing for Chapter 11 bankruptcy proceedings. GM is temporarily majority owned by US government after it invested $57.6 billion in the company.

Per the plan GM executives presented in congressional hearings the company would reach the break-even point by 2011. They further declared that they would cut costs by eliminating 47,000 jobs, closing five more unprofitable factories and cut at least $18 billion in debt from its balance sheet. It was expected that these cost cuts would allow the company to break even when the U.S. auto market returned to between 11.5 million to 12 million vehicles sold per year.

J.D Power and Associates, a global marketing information services firm, announced its projections about the new automotive industry break-even point. According to Gary Dilts, senior vice president of U.S. automotive at J.D. Power and Associates, due to cost-cutting measures such as renegotiation of union and supplier contracts, the break-even point for the domestic automotive industry will decrease by more than 2 million units when comparing current industry conditions to those forecast in 2010. Dilts explains the reason for this decrease due to the significant declines in the auto industry which resulted in lost sales volume of more than 7 million units between 2000 and 2009. This sales volume makes $175 billion in net revenue.

In automobile industry fixed costs make up a greater portion of total costs. The manufacturing plants, assembly lines and technology invested to build vehicles are some of the items forming the fixed costs. Compared to fixed costs, variable costs form a relatively smaller portion of the total costs. This puts the auto industry into a risky situation due to high operating leverage.

The definition of the operating leverage is the ratio of fixed costs to total costs. The higher a firm’s fixed costs, the higher its operating leverage. In firms having high operating leverage, small percentage changes in sales volumes result in large percentage changes in profits. This variability or sensitivity of profits to changes in sales volume put the firm into a risky position. Per the “Greater Risk, Greater Return” rule this also means more profit if demand and therefore sales volume is high.

In automobile industry since fixed costs are relatively high, during the recession times, as the demand and sales volume go down the likelihood of earnings to cover the fixed costs will decrease, i.e. it will be more difficult for the automobile companies to break even. Therefore the automobile companies start cutting the costs, especially fixed costs, like closing the unprofitable facilities, eliminating jobs. For example, GM sold its unprofitable Hummer to a Chinese company.

The car companies should increase the volume of profitable vehicles and effective advertising activities to be able to sell them to the customers. Increase in the sales volume will help in covering the high fixed costs and reach the break-even point. In August 06, 2009 Edward Whitacre Jr., the new chairman of General Motors, stated that GM needs to improve the number of vehicles sold. To do that, he said, the board may decide to move up the launch of several new vehicles.

Comparing Ford and General Motor’s Consolidated Results of Operations from Form 10-K these two companies submitted to Securities and Exchange Commission (SEC) back in 2008:

Ford (millions)

Revenue: 146,277

Cost and Expenses: 160,949

Net Income/Loss: (14,672)

Volume of Sales: 5.532

General Motors (millions)

Revenue: 148,979

Cost and Expenses: 179,839

Net Income/Loss: (30,860)

Volume of Sales: 8.144

Break-even points for these companies can be calculated using the Revenue, Cost and Volume figures above.

Ford

Average Price: 146,277 / 5.532 = $26,441

GM

Average Price: 148,979 / 8.144 = $18,293

To cover its Costs and Expenses Ford had to sell: 160,949 / 26,441 = 6.08 million cars and trucks. To cover its Costs and Expenses General Motors had to sell: 179,839 / 18,293 = 9.83 million cars and trucks. The additional sales volume GM and Ford had to make to reach the break-even point back in 2008.

Ford: 6.08 – 5.532 = 0.554 million

GM: 9.83 – 8.144 = 1.686 million

Short History of BMW

BMW has come a long way since its inception as an aircraft engine manufacturer to one of the most popular family, luxury and sports car manufacturers today.

The company began in 1913 as the Rapp-Motorenwerke firm, making aircraft engines, before merging with the Bayerische Flugzeugwerke factory, located nearby on the outskirts of Munich, in 1922. The letters BMW stand for Bayerische Motoren Werke.

In its early days, BMW mainly manufactured aircraft engines and occasionally motorcycle engines. In fact, the BMW badge was designed to resemble an aircraft propeller, and it wasn’t until 1929 that the firm became automobile manufacturers after purchasing the Fahrzeugfabrik Eisenach factory which produced Austin Sevens.

Developing the style of car manufactured over time, in 1936 BMW started to produce the 328 sports car which went on to enjoy incredible success. In 1999, the BMW 328 was nominated as car of the century.

For the three years leading up to World War II, BMW manufactured aircraft engines, motorcycles and cars. During the war, the company focused on aircraft engines and ceased making cars altogether. In 1948, motorcycle manufacturing started again but it was not until 1952 that BMW began building cars once more. The launch of the BMW 501 luxury car was not a big hit, however, and the company did not make a profit as a result and so the company brought the design and manufacturing rights to the Isetta – a micro-car, cheap to manufacture – and began selling these.

BMW’s luck changed during the next decade and the 1960s brought considerable success for the firm. The BMW 1500, a four-cylinder sports car, was introduced in 1961 followed shortly afterward by the BMW 2002, a two-door car that stayed in production until 1976 and was the predecessor of the BMW 3 Series.

The ’70s saw BMW continue to build their reputation for creating original and sought-after cars, as this decade saw the launch of the 3, 5 and 7 Series. Between 1970 and 1993, BMW increased its output fourfold and turnover by an incredible 1700%.

Between 1994 and 2000, BMW had ownership of the British Rover Group but the venture was not successful and the company soon got rid of Rover. However, BMW retained the rights to Mini and has enjoyed – and continues to enjoy – considerable achievement with this business.

Today, BMW is seen as an innovative manufacturer and has a reputation for excellence, both for its design and quality of cars.

Brazil’s Trade Results and Top Trading Partners in 2009

Brazil is one of the leading developing countries, one of the four emerging markets comprising the B-R-I-Cs (i.e., Brazil, Russia, Indian and China). Its economy has overall proved to be resilient during the global economic crisis. Nevertheless, Brazil did not escape the crisis unscathed. According to Brazil’s Ministry of Development, Industry & Commerce, Brazil’s exports decreased nearly 25% from 2008 (US$198 billion) to 2009 (US$153 billion), and its imports likewise decreased about 25% during that period from US$173 billion to US$127 billion.

In 2009, for the first time, China became the largest importer of Brazilian products, replacing the United States. Although exports decreased by about 20% from 2008 to 2009 due to the global economic crisis, exports to China increased by over 20% from during that period (comprising 10.2% of Brazil’s total exports). Meanwhile exports to the United States decreased by nearly 40%, comprising 10.2% of Brazil’s total exports. The remaining countries rounding up the top five export markets in 2009 were Argentina, Holland and Germany, comprising 8.4%, 5.3% and 4% of Brazil’s total exports, respectively.

Brazil has a very strong industrial base. It exports not only natural resources and agricultural products, but also industrial and commercial products. At the top of the list are natural resources (like iron ore)) and agricultural products (like soy beans, coffee and sugar). However, moving down the list, their manufactured products include vehicle parts, airplanes, petrochemical products and ethanol.

Meanwhile, in regards to imports, both the United States and China again are the top two countries that export to Brazil. The United States is the top country (comprising 15.7% of Brazil’s imports) and China came in second place in 2001 (comprising 12.5%). Both countries decreased exports to Brazil by 20% from 2008 to 2009. Rounding up the top five countries are Argentina, Germany and Japan, comprising 8.8 %, 7.7% and 4.2% of Brazil’s total imports, respectively. Imported products include passenger cars, medicines, vehicle parts, potassium chloride, engines and machines.

How to Maintain Your Car Alternator

Virtually all cars built in recent years have AC generators, commonly called alternators.

The alternator electrical system represents a high achievement in obtaining the most electrical power from a minimum draw on engine output. It has been termed the ultimate electrical power source for automotive use.

The alternator offers the potential for longer battery life in addition to its primary advantage – higher output. The higher output is due to the comparatively low weight of the rotor and coil assembly allowing greater pulley ratios for higher rpm. The result, of course, is higher output – even at engine idle. Maintaining the advantage an alternate gives your electrical system is just a matter of knowing the alternator and keeping it in top tune.

The alternator is no harder to tune than the generator. If trouble is apparent, you don’t usually have to replace the entire unit. The unit breaks into two parts – the stator and rotor – allowing you to replace the one that is giving the trouble.

In many cases, you don’t even have to replace one of those major components. A common problem, low output, is normally traced to either of two things: a slipping fan belt or defective diodes (rectifiers).

Fan belt tension is critical with the alternator. Always make sure the belt is in good condition and adjusted to specification.

The one precaution you must keep in mind when working with the alternator is guarding against reserve polarity. Reserve polarity of the alternator or the battery for even an instant and you stand a chance of burning out the rectifiers. To prevent accidental grounding, furthermore, you should always use insulated tools when working in the area of the alternator.

Following adjustment of the fan belt, turn your attention to the regulator. Make sure all connections at this unit are tight. Follow this by checking the condition of the regulator points. If you find they’re burned or pitted, you’ll have to replace the regulator. Now, check and tighten all connections including those to the ignition switch, the ballast resistor, the regulator and the conducting surfaces of the fuse and holder.

Unscrew the brushes from the alternator and inspect them for wear. If worn, replace them.

In some cars, the brushes can be removed from the alternator with the unit in the car. Unscrewing the external cap screws, to which the brushes are attached, does this. In other cars, the unit must be removed from the car to reach the brushes, which can then be unscrewed.

If it becomes necessary to take the unit apart, remove it from the car and split it open, separating the stator from the rotor. Test the rectifiers first. This can be done with a commercial diode tester, although you can also use any continuity tester, such as an ohmmeter or a test lamp that plug into household current.

If a diode is defective, it must be replaced. This requires special tools and should be left to professional shop.

Next inspect the stator wiring carefully for breaks. To be absolutely sure there are none, you should test from the stator leads to the stator core with a 110-volt test lamp or other suitable tester. If the lamp lights, the stator is grounded and should be replaced.

Finally, test the field windings in the rotor part of the alternator. This is done with an ammeter hooked to the alternator battery output terminal while turning the rotor shaft by hand. The correct field current draw should be recorded on the meter. This reading differs from car to car, so check your service manual.

The above description tells you what to do if you are not getting output from the alternator. However, there are things a faultily adjusted or malfunctioning alternator can cause – most can be checked on the car.

Water Softener Use In Mobile Auto Detailing

What is considered hard water and what are the degrees of hardness? Well very hard water would be 10.5 grains per gallon and 180 parts per million and above. But you need to realize that even moderately hard water of 3.5 to 7 grains per gallon and 60-120 parts per million will leave hard water spots. Slightly hard water such as 1 to 3.5 grains per gallon and 17.1 to 60 part per million will not leave noticeably hard water spots that you cannot cure with a chamois. But really as a professional auto detailer you are really looking for soft water of less than 1 grain per gallon and 17 parts per million.

What Makes The Water Hard?

Hardness in water is caused calcium and magnesium ions that form insoluble compounds; sometimes iron and even aluminum. There are many ways to soften water. Some are more complicated than others; Aeration, De-Ionization or ion-exchange, Distillation, Reverse Osmosis or Softening.

Softening by use of a water softener is the simplest concept used today; water softeners replace hardness ions like calcium and magnesium with sodium or non-scaling ions. The ion exchange resin used in the process is recharged periodically with salt drawn from a storage tank. Many water treatment experts agree and Lance Winslow concurs that softening can be most cost effective when the water has as few as one to five grains per gallon of hardness. Most mobile operators will be happy with one to three grains per gallon of hardness and probably won’t even purchase a softening unit until the hardness is five plus grains per gallon. Their theory is well taken because, if the total dissolved solids (TDS) is that low, there will be little water spotting on cars anyway.

One reason to put in a water softener even if your water is 5 gpg or less is because you wish to prevent scaling in the coils of your steam cleaner or save your pressure washing pump on your auto detailing rig. On a cold water machine, this is not as important because 5 gpg or less won’t ruin a pump. More than five can over time.

Hardness also hinders soap from doing its job. You may notice that your soaps are not cleaning properly. That’s because they are cleaning the water first and combining with the compounds in the water rather than the dirt on the car. You see, the hardness in the water has a tendency to neutralize those cleaning compounds and you have to actually use more soap to offset the neutralizing effect of the hardness minerals.

With hard water, you will use more soap and the cars still aren’t clean. I encourage you to talk to your soap vendors for helpful advice on water chemistry and treatment requirements. Your soap strategy should be custom tailored to your city and the hardness of the water you put in your tank.

Most independent auto detailing professionals agree that areas with hard water will also cause a film on cars that are washed when no softener is used. They also agreed at the annual conference that the decision to purchase a softener should be based on a real water test. You might wish to contact a water treatment dealer such as: Rain Soft, Culligan, Apollo, Calgon, Rayne water Systems or the Water Man in your area. They can help you by having the local water tested or ask city water authority for information on their supply. Once your decision is made to purchase a softener, selecting the proper equipment is easy. Softener sizes should be based upon two factors: Flow Rate (GPM) and Grains Per Gallon (GPG).

Flow rate would typically be six to eight gpm (gallons per minute) with your hose at your residence. We recommend you change your pressure regulator to 90-110 PSI (Pounds Per Square Inch). This would give you approximately ten gpm. So you need a water softener that is a little bigger than the basic model.

Water softeners are basically like refrigerators; says Car Wash Guys Founder Lance Winslow;

“They could last two years or twenty years…and a lot depends on how much goes in and how often it comes out.”

This is why you should monitor softening equipment. You can test the hardness with a testing kit or just pay attention when you’re washing cars. Steel softening tanks last for years. Fiberglass units last well also. Plastic units crack. You may need to change resin every couple of years.

Chances are you will choose to rent softeners for $30 per month and let the exchange company recharge them for you. Be careful when hiring water softener vendors. Ask us for help. You may even be able to trade services for water softening rental plus make money on the account because water softener rental companies have lots of delivery trucks. In any case think on these issues when considering a water softening strategy for your mobile car wash or auto detailing business.